Fiscal Policy: Taxation

Taxation is the primary means by which governments raise revenue to fund public services and redistribute income. For A-Level Economics, you need to understand the different types of tax, the distinction between progressive, regressive, and proportional systems, the economic effects of taxation, and the theoretical framework provided by the Laffer curve.

Key Definition: A tax is a compulsory levy imposed by the government on individuals or firms. It transfers purchasing power from the private sector to the public sector.

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Direct and Indirect Taxes